American Stock Exchange-listed blank cheque firm India Globalization Capital (IGC) has entered a definitive agreement to acquire a Chinese iron ore processing company, Linxi H&F Economic and Trade Co (PRC Ironman), for an undisclosed amount.
Under the agreement, IGC will issue 31.5 million shares of IGC common stock for the purchase of 95 per cent of the equity in PRC Ironman. In addition, the stock purchase agreement provides for a contingent payment by IGC to PRC Ironman’s majority shareholder of $1 million or Rs 5 crore within 30 days of closing and upon satisfaction of certain post-closing covenants, according to a company statement. The acquisition is expected to close in the current fiscal quarter, the statement has added.
PRC operates a beneficiation plant on 2.2 sq. km of iron ore deposits that contain more than 3 million metric tonnes of ore deposits worth around $350 million. The output of the beneficiation process is 65-67 per cent iron ore, which currently sells in the range of $140 per tonne. PRC Ironman has an agreement with the local Chinese authorities to operate this facility into August 2018.
“PRC Ironman has audited revenues of approximately $13.5 million (Rs 67.5 crore) and approximately $5.9 million (Rs 29.5 crore) in net after tax earnings for FY March 31, 2011, as well as a good liquid balance sheet. This acquisition will greatly enhance our position in the materials business by creating a rapidly growing, profitable iron ore business for IGC,” said IGC CEO Ram Mukunda on the acquisition.
Maryland-based IGC operates three core businesses – highway & heavy construction, mining & quarrying and civil construction & engineering.
In December 2010, IGC formed a mining joint venture with Kommu Venkateshwara Metal Miners (KVM) to establish a mine and export facility in Andhra Pradesh. Under this deal, IGC picked up 60 per cent stake in the venture, which is expected to focus on mining iron ore over 500 acres of land owned by KVM. It is expected to invest $3 million initially in the venture.
IGC’s investments include IGC India Mining & Trading, a Chennai-based firm involved in the export of iron ore to China; IGC Materials, a Nagpur-based firm that operates rock quarries and provides construction materials to the industry; Techni Bharathi, a construction company located in Kerala and supply side logistics firm IGC Logistics.